Fair Value

Fair value refers to the estimated worth of an asset or liability based on current market conditions, rather than its historical cost. It represents what someone is willing to pay or receive for an item in an open and knowledgeable market. Determining fair value considers factors like the asset's condition, market demand, and similar transactions. This concept is important in finance and accounting, as it helps provide a more accurate picture of an entity's financial health, ensuring that stakeholders make informed decisions based on realistic and up-to-date valuations.